Helios Towers Regulatory News (HTWS)

HELIOS TOWERS, LTD

Results for the three and nine months ended 30 September 2019

London, 14 November 2019: Helios Towers, Ltd ("Helios Towers" or "the Company"), the independent telecoms tower infrastructure company, today announces results for the three months and nine months to 30 September 2019.

Financial highlights

·; Q3 2019 is the 19th consecutive quarter of Adjusted EBITDA growth.

·; Q3 2019 revenue increased by 11% year-on-year to US$97.3m (Q3 2018: US$88.1m).

·; Q3 2019 Adjusted EBITDA up 16% year-on-year to US$52.5m (Q3 2018: US$45.2m) with Q3 2019 Adjusted EBITDA margin at 54% (Q3 2018: 51%), up 3ppt.

·; Q3 2019 operating profit increased by US$3.1m to US$0.1m (Q3 2018: US$(3.0)m).

·; Revenue for the 9 months to 30 September 2019 increased by 8% year-on-year to US$288.0m (30 Sep 2018: US$266.2m).

·; Adjusted EBITDA for the 9 months to 30 September 2019 increased by 16% to US$151.5m (30 Sep 2018: US$131.1m) with Adjusted EBITDA margin at 53% (30 Sep 2018: 49%), up 4ppts.

·; Operating profit for the 9 months to 30 September 2019 increased by US$17.8m to US$12.7m (30 Sep 2018: US$(5.1)m).

Operational highlights

·; Increase in tenants of 9% year-on-year to 14,226 tenants (Q3 2018: 13,063 tenancies).

·; Increase in sites of 5% year-on-year to 6,903 total sites (Q3 2018: 6,560 total sites).

·; Tenancy ratio increased by 0.07x to 2.06x (Q3 2018: 1.99x).

·; On 18 October 2019 Helios Towers Plc was admitted to the premium segment of the Official List and trading on the

Main Market of the London Stock Exchange (Ticker: HTWS.L).

·; The following new appointments were made to the Plc Board - Sir Samuel Jonah (Chairman), Magnus Mandersson (Senior Independent Director) and Alison Baker (Independent Non-Executive Director). A full list of Non-executive Directors appointed at the time of the Group's IPO and their biographies can be found after Note 21 of this announcement.

1 For "Adjusted Measures" refer to full definitions in the "certain defined terms and conventions" section at the end of this announcement.

Kash Pandya, Chief Executive Officer, said:

"Helios Towers delivered another strong set of results for the third quarter and continued our trend of 19 consecutive quarters of Adjusted EBITDA growth. We continue to focus on driving top-line growth and Adjusted EBITDA performance, leveraging the exciting growth in our sub-Saharan markets, our long term client contracts and a sharp focus on operational excellence. The business is performing in-line with our expectations which gives us confidence in the outlook for the full year."

Sir Samuel Jonah, Chairman, said:

"The management and the broader Helios Towers' team have achieved a huge amount in the past quarter. The business has maintained its momentum through the recent IPO process and I would like to congratulate everyone at the Company.

I would also like to take this opportunity publicly to welcome our new shareholders to the business. Helios Towers has built strong positions in high growth markets. We will continue to invest in the critical mobile and telecoms infrastructure that is so important to our corporate customers, their consumers and the economic development of the African countries in which we operate."

For further information go to:

www.heliostowers.com

Investor Relations

Manjit Dhillon

+44 (0)776 723 7010

Media relations

Edward Bridges / Stephanie Ellis

FTI Consulting LLP

+44 (0)20 3727 1000

About Helios Towers ("HT")

·; Helios Towers is a leading independent telecommunications tower infrastructure company in Africa, having established one of the continent's most extensive tower portfolios with close to 7,000 towers across five countries. It builds, owns and operates telecom passive infrastructure, providing services to mobile network operators.

·; HT owns and operates more sites than any other operator in each of Tanzania, Democratic Republic of Congo ("DRC"), and Congo Brazzaville. It is also a leading operator in Ghana with a strong urban presence and established a presence in South Africa in 2019.

·; HT pioneered the model in Africa of buying towers that were held by single operators and providing services utilising the tower infrastructure to the seller and other operators. This allows wireless operators to outsource non-core tower-related activities, enabling them to focus their capital and managerial resources on providing higher quality services more cost-effectively.

Financial and Operating Review

The analysis of the Group's financial results and performance has largely been performed on a quarterly basis as the Group reports its results quarterly. A quarterly analysis is considered more appropriate and meaningful. Other sections of this interim report present a nine months view of the Group's financial position.

Condensed consolidated statement of profit or loss

For the 9 and 3 months ended 30 September

Key metrics

For the 3 months ended 30 September

1 Gross margin means gross profit, adding back site and warehouse depreciation, divided by revenue.

2 Group Adjusted EBITDA for the quarter is stated including corporate costs of US$4.3 million (2018: US$4.1 million).

Tenancies have increased by 126 during the quarter which is mainly driven by growth in Congo Brazzaville, Ghana and South Africa. Year-on-year tenancy growth of 1,163 is principally due growth in sites of 343 and growth in total colocations of 820. Consequently, tenancy ratio has increased by 0.07x year-on-year, from 1.99x to 2.06 as at 30 September 2019.

Total tenancies as at 30 September

Revenue

Revenue increased by 11% to US$97.3 million in the quarter ended 30 September 2019 from US$88.1 million in the quarter ended 30 September 2018. The increase was largely driven by the growth in total tenancies from 13,063 as of 30 September 2018 to 14,226 as of 30 September 2019. Revenues for the nine month period ended 30 September 2019 were $288.0 million. 87% of these revenues were from Africa's Big-Five MNOs and 57% were denominated in either USD or XAF (which is pegged to the Euro).

Cost of sales

The table below shows an analysis of the cost of sales on a country-by-country basis for the nine month period ended 30 September 2019 and 2018.

The table below shows an analysis of the cost of sales on a country-by-country basis for the three month period ended 30 September 2019 and 2018.

Year-on-year, cost of sales remained relatively flat with a minimal increase to US$64.1 million in the quarter ended 30 September 2019 from US$63.9 million in the quarter ended 30 September 2018. Gross margin for the quarter ended 30 September 2019 improved by 200 basis points to 67% (Q3 2018: 65%). Power costs increased in Tanzania and DRC compared to the prior year quarter, due to increased number of sites, offset with lower power costs in Ghana.

Administrative expenses

Administrative expenses increased by 23% to US$27.5 million in the quarter ended 30 September 2019 from US$22.4 million in the quarter ended 30 September 2018. The increase in administrative expenses is primarily due to exceptional and adjusting items of US$9.5 million in the quarter ended 30 September 2019, with the majority of this being related to the listing on the London Stock Exchange ("LSE"). In addition, amortisation increased year-on-year in relation to IT project amortisation during the quarter ended 30 September 2019.

Loss on disposal of property, plant and equipment

Loss on disposal of property, plant and equipment was a loss of US$5.7 million in the quarter ended 30 September 2019, compared to a loss of US$4.8 million during the quarter ended 30 September 2018. This increase in loss on disposal was primarily a result of the disposal of assets in the current year, mainly due to site consolidations in DRC and Tanzania.

Other gains and losses

Other gains and losses recognised in the quarter ended 30 September 2019 was a gain of US$24.0 million, compared to a loss of US$5.2 million in the quarter ended 30 September 2018. This is in relation to the fair value movement of the embedded derivative valuation of the bond.

Finance costs

Finance costs of US$28.4 million for the quarter ended 30 September 2019, mainly comprise of interest for the US$600 million 9.125% bond and the US$100 million term loan facility activated in October 2018, of which US$75 million was drawn at 30 September 2019. The year-on-year decrease in foreign exchange differences for the quarter ended 30 September 2019 is driven primarily by the Central African franc.

Tax expense

Our tax expense was US$2.9 million in the quarter ended 30 September 2019 as compared to US$0.7 million in the quarter ended 30 September 2018. Though entities in Congo B, Tanzania and DRC have continued to be loss making, minimum income tax has been levied based on revenue as stipulated by law in these jurisdictions. Ghana is profit making and subject to income tax.

Adjusted EBITDA

Adjusted EBITDA was US$52.5 million in the quarter ended 30 September 2019 compared to US$45.2 million in the quarter ended 30 September 2018. The increase in Adjusted EBITDA between periods is primarily attributable to the changes in revenue, cost of sales and administrative expenses, as discussed above. See note 4 for more details.

Contracted revenue

The following table provides our total undiscounted contracted revenue by country as of 30 September 2019 for each of the periods from 2019 to 2023, with local currency amounts converted at the applicable average rate for US dollars for the period ended 30 September 2019 held constant. Our contracted revenue calculation for each year presented assumes: (i) no escalation in fee rates, (ii) no increases in sites or tenancies other than our committed tenancies, (iii) our customers do not utilise any cancellation allowances set forth in their MLAs, (iv) our customers do not terminate MLAs early for any reason and (v) no automatic renewal.

The following table provides our total undiscounted contracted revenue by key customers as of 30 September 2019 over the life of the contracts with local currency amounts converted at the applicable average rate for US dollars for the period ended 30 September 2019 held constant. Our contracted revenue calculation for each year presented assumes: (i) no escalation in fee rates, (ii) no increases in sites or tenancies other than our committed colocations, (iii) our customers do not utilise any cancellation allowances set forth in their MLAs, (iv) our customers do not terminate MLAs early for any reason and (v) no automatic renewal.

Management Cash Flow

1 Payment of lease liabilities includes interest and principal repayments of lease liabilities

2 Cash conversion % is calculated as Portfolio free cash flow divided by Adjusted EBITDA

3 Net payment of interest corresponds to the net of "Interest paid" (including withholding tax) and "Interest received" in the Condensed consolidated statement of cash flows, excluding interest payments on lease liabilities

4 Discretionary capital additions includes acquisition, growth and upgrade capital additions

5 Net change in working capital corresponds to movements in working capital, excluding cash paid for exceptional and EBITDA adjusting items and including movements in capital expenditure related working capital

6 Cash paid for exceptional and EBITDA adjusting item corresponds to cash paid in respect of items per note 4 of the condensed consolidated interim financial statements -litigation costs, exceptional project costs, share-based payments and long term incentive plans and deal costs

7 Refer to reconciliation of cash generated from operating activities to portfolio free cash flow

Cash conversion has increased from 79% for the quarter ended 30 September 2018 to 86% for the quarter ended 30 September 2019, this is driven by an increase in Adjusted EBITDA, reduction in maintenance and corporate capital additions and payments of lease liabilities, partially offset by tax paid.

Capital expenditure

For the 9 month period ended 30 September

The following table shows our capital expenditure additions by category during the nine months ended 30 September:

Acquisition capex in the nine months ended 30 September 2019 relates to South Africa, excluding the fair value of intangible assets acquired and goodwill recognised under IFRS 3 (see note 20), and colocation rights acquired in Tanzania (see note 7).

Off-Balance Sheet arrangements

Helios Towers does not have any off-balance sheet arrangements.

Indebtedness

As of 30 September 2019 and 31 December 2018 the Group's outstanding loans and borrowings, excluding lease liabilities, were US$668.8 million (net of issue costs) and US$628.0 million respectively. For more details, see note 13 to the condensed consolidated interim financial statements for the period ended 30 September 2019.

Material recent developments

On 18 October 2019 the ordinary shares of Helios Towers PLC ("HT PLC") were admitted to the premium segment of the Official List of the Financial Conduct Authority and to trading on the main market of the London Stock Exchange plc ("Admission"). HT PLC issued new shares in the Global Offer raising gross proceeds of US$125.0 million.

Prior to Admission on 18 October 2019 the Group completed its pre-IPO reorganisation which included (i) the insertion of HT PLC, a public company limited by shares incorporated in England and Wales, as the ultimate parent company via a share-for-share exchange, (ii) the unwind of the management incentive plans where shares or options over shares were issued or granted to the limited partners of the MIP schemes and (iii) HT PLC issued and allotted shares to Helios Towers plc employee benefit trust to satisfy future settlement of pre-IPO nil-cost option awards. The Group will recognise an IFRS2 share-based payment charge in respect of the unwind of the management incentive schemes in its financial statements to 31 December 2019.

Following Admission, HT PLC commenced a capital reduction process to be approved by the court pursuant to section 645 of the Companies Act, in order to create additional distributable reserves. It is intended to reduce the nominal value of the shares to 1 pence each and to cancel the share premium account. The effect of these actions is to create distributable reserves equivalent to the amounts reduced. The distributable reserves created will provide HT PLC with the flexibility to pay dividends in the future if appropriate or absorb any impairments in the value of its assets, should this occur.

A change of control (as defined by the relevant local tax authority) of certain of the Group's subsidiaries, may trigger non-resident capital gains tax liabilities for the Group. The potential outcome (including any future financial obligations) is uncertain. On admission to the LSE, the selling shareholders have agreed an amount that is considered to be sufficient to cover the potential change of control tax liabilities, is retained and held in escrow from the net proceeds of the sales of shares.

Condensed interim financial statements

Independent review report to the members of Helios Towers Plc

We have been engaged by Helios Towers Plc. to review the condensed set of financial statements of Helios Towers, Ltd. in the interim financial report for the three and nine month period ended 30 September 2019 which comprises the condensed consolidated statement of profit or loss and other comprehensive income, condensed consolidated statement of financial position, condensed consolidated statement of changes in equity, condensed consolidated statement of cash flows and related notes 1 to 21. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely for the members of Helios Towers Plc. in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the members of Helios Towers Plc. those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the members of Helios Towers Plc, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the board of Helios Towers Plc.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting".

Our responsibility

Our responsibility is to express to the members of Helios Towers Plc. a conclusion on the condensed set of financial statements in the interim financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements of Helios Towers, Ltd. in the interim financial report for the three and nine month period ended 30 September 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34.

Deloitte LLP

Statutory Auditor

London, United Kingdom

14 November 2019

Condensed consolidated statement of profit or loss and other comprehensive income

For the 9 and 3 months ended 30 September 2019

Condensed consolidated statement of financial position

As at 30 September 2019

Condensed consolidated statement of changes in equity

For the 9 months ended 30 September 2019

Condensed consolidated statement of cash flows

For the 9 and 3 months ended 30 September 2019

Notes to the condensed interim financial statements

For the 9 months ended 30 September 2019

1. General Information

Helios Towers plc is a public company incorporated in the UK. As set out in note 21, Helios Towers plc became the ultimate parent company of the Group on 18 October 2019. Prior to that date, the ultimate parent company of the Group was Helios Towers, Ltd, a company incorporated in Mauritius. Accordingly, the condensed set of financial statements included in this interim financial report represents the group comprising Helios Towers, Ltd and its subsidiaries, being the group that existed at 30 September 2019 and for the nine month period then ended.

Going concern

The Directors believe that the Group is well placed to manage its business risks successfully, despite the current uncertain economic outlook. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current committed facilities.

The Directors have looked at forecast compliance with covenants attached to the drawn loan facilities and have concluded that the Group should be able to operate within the level of its current committed facilities.

As part of their regular assessment of the Group's working capital and financing position, the directors have prepared a detailed trading and cash flow forecast for a period which covers at least 12 months after the date of approval of the interim financial statements. In assessing the forecast, the directors have considered:

• trading risks presented by the current economic conditions in the operating markets;

• the impact of macroeconomic factors, particularly interest rates and foreign exchange rates;

• the status of the Group's financial arrangements;

• progress made in developing and implementing cost reduction programmes and operational improvements; and

• mitigating actions available should business activities fall behind current expectations, including the deferral of discretionary overheads and restricting cash outflows.

Management have considered the latest forecasts available to them and additional sensitivity analysis has been prepared to consider any reduction in anticipated levels of Adjusted EBITDA and operating profit.

2. Accounting Policies

Basis of preparation

The interim financial statements of Helios Towers, Ltd and its subsidiaries are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRSs").

The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as issued by the International Accounting Standards Board.

Accounting policies are consistent with those adopted in the last statutory financial statements of Helios Towers, Ltd and the audit opinion was unmodified. In addition, please refer to the new accounting policy notes below. The information as of 31 December 2018 has been extracted from the audited financial statements of Helios Towers, Ltd for the year ended 31 December 2018.

In the condensed consolidated statement of cash flows, interest paid on lease liabilities in the prior period of US$10.2 million were presented as repayment of lease liabilities in financing activities. In the current period, they have been reclassified and presented as interest paid in operating activities.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates. These condensed financial statements do not constitute statutory financial statements under the Companies Act.

New accounting policies since 31 December 2018

Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group in exchange for control of the acquiree. The identifiable assets, liabilities and contingent liabilities ("identifiable net assets") are recognised at their fair value at the date of acquisition. Acquisition-related costs are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred over the fair value of acquired assets and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the gain is recognised in profit or loss. Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of profit or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the cash-generating units ("CGU") that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

CGUs to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata based on the carrying amount of each asset in the unit. Any impairment loss is recognised directly in profit or loss. An impairment loss recognised for goodwill is not able to be reversed in subsequent periods.

On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Intangible assets

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The fair value amounts ascribed to such intangibles are arrived at by using appropriate valuation methodologies.

Contingent consideration

When the consideration transferred by the Group in a business combination includes a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the "measurement period" (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. Subsequently, changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments are recognised in profit or loss, when contingent consideration amounts are remeasured to fair value at subsequent reporting dates.

Key Sources of Estimation Uncertainty

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the recoverable amount being the value in use or fair value less costs of disposal of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value (see note 7).

The recoverable amount of each cash generating unit has been determined based on a value in use calculation using cash flow projections for the next ten years from financial budgets approved by senior management as this period matches the typical customer contract period for tower management.

Deferred taxation

Deferred tax is provided, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for accounting purposes.

Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which these items can be utilised. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition of an asset and liability in a transaction other than a business combination and, at the time of the transaction, affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be utilised.

Deferred tax is measured at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, based upon tax rates and legislation that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except where it relates to items charged or credited directly to equity, in which case the deferred tax is also recognised in equity. The deferred tax amounts shown in the balance sheet are not discounted.

3. Segmental reporting

The following segmental information is presented in a consistent format with management information considered by the CEO of each operating segment, and the CEO and CFO of the Group, who are considered to be the chief operating decision makers (CODM). Operating segments are determined based on geographical location. All operating segments have the same business of operating and maintaining telecoms towers and renting space on such towers. Accounting policies are applied consistently for all operating segments. The segment operating result used by CODM is Adjusted EBITDA, defined in note 4.

1 Gross margin means gross profit, add back site and warehouse depreciation, divided by revenue.

Capital Additions, Depreciation and Amortisation

Right-of-use assets

4. Reconciliation of aggregate segment Adjusted EBITDA to loss before tax

The segment operating result used by chief operating decision makers is Adjusted EBITDA.

Management defines Adjusted EBITDA as loss for the period, adjusted for tax expenses, finance costs, other gains and losses, interest receivable, loss on disposal of property, plant and equipment, amortisation of intangible assets, depreciation and impairment of property, plant and equipment, depreciation of right-of-use assets, recharged depreciation, deal costs for aborted acquisitions, deal costs not capitalised, share-based payments and long-term incentive plan charges, and exceptional items. Exceptional items are material items that are considered exceptional in nature by management by virtue of their size and/or incidence.

The Group believes that Adjusted EBITDA facilitates comparisons of operating performance from period to period and company to company by eliminating potential differences caused by variations in capital structures (affecting interest and finance charges), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and booked depreciation on assets. The Group excludes certain items from Adjusted EBITDA, such as loss on disposal of property, plant and equipment, and exceptional and adjusting items because it believes they are not indicative of its underlying trading performance.

Adjusted EBITDA is reconciled to loss before tax as follows:

1 Relates to legal costs incurred in connection with a previously terminated private equity transaction

2 Exceptional project costs relate to the listing of equity on the London Stock Exchange

3 Share-based payments and long term incentive plan charges and associated costs

4 Includes acquisition related costs relating to South Africa. Refer to note 20 for further detail

5 The Group incurred costs charged to it through a service contract from Helios Towers Africa LLP. Management consider that the depreciation element of the charge should be removed from Adjusted EBITDA as it is depreciation in nature

5. Finance costs

6. Tax expense and deferred tax

Though entities in Congo B, Tanzania and DRC have continued to be loss making, minimum income tax has been levied based on revenue as stipulated by law in these jurisdictions. Ghana is profit making and subject to income tax.

The Company was a Category 2 - Global Business Licence Company (C2-GBLC) during the current and preceding financial periods. C2-GBLC is not subject to any income tax in Mauritius.

The applicable tax rates for the Company's subsidiaries range from 20% to 40%.

Deferred tax

A tax rate of 28% has been used in these financial statements to measure the deferred tax assets and liabilities.

Deferred tax liabilities relates to the recognition of other intangible assets upon the acquisition of HTSA Towers (Pty) Ltd.

7. Intangible assets

Impairment

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. Net book value has been compared with recoverable amount to assess impairment. Intangibles on acquisition of subsidiary undertakings includes $3.0 million of assets for which consideration was paid in cash for the acquisition of SA Towers Proprietary Limited and Sky Coverage Proprietary Limited, the remaining $28.8 million relates to the fair value of intangible assets acquired and goodwill recognised under IFRS 3. The Group's CGUs are aligned to its operating segments.

The recoverable amount of each cash generating unit has been determined based on a value in use calculation using cash flow projections for the next ten years from financial budgets approved by senior management as this period matches the typical customer contract period for tower management.

As at the period end, a full impairment assessment has not been carried out however management are satisfied that there is no immediate impairment following the IFRS 3 acquisition.

Key assumptions used in value-in-use calculations

The calculation of value-in-use is most sensitive to the following assumptions:

• Number of towers under management at the end of each year together with the lease upgrade or number of tenants per tower. These are based on estimates of the number of tower opportunities in the relevant markets and the expected growth in these markets;

• discount rate; and

• operating cost and capital expenditure requirements.

A long-term growth rate of 5% has been applied to extrapolate the cash flow projections into perpetuity, based on management's estimate of the long-term annual growth rates in Adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation). From the financial model a net present value was derived, using discount rates ranging from 15% to 20%, and compared to the goodwill carrying value. The discount rates were based on an industry average weighted average cost of capital assuming debt leveraging of 40% and market interest rates ranging from 9% to 10%.

8a. Property, plant and equipment

In January 2019, the Group entered into a shareholder agreement with Vulatel (Pty) Ltd to form a new legal entity named Helios Towers South Africa Holdings (Pty) Ltd ("HTSA") which is consolidated into the Group. The Group holds 66% of the share capital of this entity with Vulatel holding the remaining 34%. Subsequent to this, on 29 March 2019, Helios Towers Ltd transferred US$4 million cash into HTSA whilst Vulatel contributed its share in the form of assets including 13 edge data centres valued at US$2 million, which are included in the site assets above. Property, plant and equipment additions during the period includes US$7.6 million of site assets for which consideration was paid in cash for the acquisition of SA Towers Proprietary Limited and Sky Coverage Proprietary Limited.

8b. Right-of-use assets

9. Derivative financial instruments

The amounts recognised in the statement of financial position are as follows:

The derivatives represent the fair value of the put and call options embedded within the terms of the bond. The call options give the Group the right to redeem the bond instruments at a date prior to the maturity date (8 March 2022), in certain circumstances and at a premium over the initial notional amount.

The put option provides the holders with the right (and the Group with an obligation) to settle the Senior Notes before their redemption date in the event of a change in control (as defined in the terms of the Senior Notes, which also includes a major asset sale), and at a premium over the initial notional amount. The options are fair valued using an option pricing model that is commonly used by market participants to value such options and makes the maximum use of market inputs, relying as little as possible on the entity's specific inputs and making reference to the fair value of similar instruments in the market. The options are considered a Level 3 financial instrument in the fair value hierarchy of IFRS 13, owing to the presence of unobservable inputs. Where Level 1 (market observable) inputs are not available, the Helios Group engages a third party qualified valuer to perform the valuation. Management works closely with the qualified external valuer to establish the appropriate valuation techniques and inputs to the model. The Senior Notes are quoted and it has an embedded derivative. The fair value of the embedded derivative is the difference between the quoted price of the Senior Notes and the fair value of the host contract (the Senior Notes excluding the embedded derivative). The fair value of the Senior Notes as at the Valuation Date has been sourced from an independent third party data vendor. The fair value of the host contract is calculated by discounting the Senior Notes's future cash flows (coupons and principle payment) at USD 3-month LIBOR plus Helios Towers's credit spread. The main driver of the increase of the fair value of the embedded derivative between 31 December 2018 and 30 September 2019 is this specific instrument's credit spread, a relative 1 per cent increase in this would result in an approximately US$0.3 million decrease in value.

As at the reporting date, the call option had a fair value of US$55.3 million (31 December 2018: US$7.1 million), while the put option had a fair value of US$0 million (31 December 2018: US$0 million). During the quarter ended 30 September 2019, a US$24.0 million gain (quarter ended 30 September 2018: US$5.2 million loss) fair value adjustment was recognised through profit and loss. Management considered early call of the bond however, this has not been undertaken as a result of the proximity of the potential IPO. Management has performed a valuation of the embedded derivative at 30 September 2019 consistently with previous quarters.

10. Trade and other receivables

The Group measures the loss allowance for trade receivables and trade receivables from related parties at an amount equal to lifetime expected credit losses ("ECL"). The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor's current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date.

There has been no change in the estimation techniques or significant assumptions made during the current reporting period. Interest can be charged on past due debtors. The normal credit period of services is 30 days.

Of the trade receivables balance at 30 September 2019: 70% (31 December 2018: 61%) is due from five of the Group's largest customers. The Group does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the Group to the counterparty.

Debtor days

The Group calculates debtor days as set out in the table below. It considers its most relevant customer receivables exposure on a given reporting date to be the amount of receivables due in relation to the revenue that has been reported up to that date. It therefore defines its Net Receivables as the total trade receivables and accrued revenue, less deferred income.

1 Trade receivables, including related parties

2 Reported within other receivables

11. Cash and cash equivalents

12. Share capital

The share capital as of 30 September 2019 was as follows: